• Insufficient Policies: European banks are failing to fully align with 1.5°C climate goals and lack comprehensive biodiversity strategies.
• Greenwashing Risks: Weak scrutiny and transparency in green finance targets open the door to misleading claims.
• Missed Opportunities: Limited use of biodiversity tools and inadequate sector targets highlight gaps in banks’ sustainability approaches.

Europe’s Banks Are “In Debt to the Planet”

Europe’s 25 largest banks are not doing enough to address the dual crises of climate change and biodiversity loss, according to a new report. Despite committing to net-zero by 2050, many banks’ strategies are inadequate, with gaps in policy implementation, transparency, and ambition.

“Banks are exposed to biodiversity risks but are also driving them,” the report warns.

Findings at a Glance

1. Climate Targets Lack Teeth
   While all surveyed banks committed to net-zero by 2050, only six have interim targets to cut emissions. Most targets focus on intensity rather than absolute reductions, with limited coverage of critical sectors like agriculture and chemicals.“Only one bank published a target for agriculture, and no bank has covered the chemicals sector,” the report noted.
2. Fossil Fuel Policies Riddled with Loopholes
   Although over 75% of banks now commit to coal phaseouts, policies often cater to existing clients rather than the climate. Only three banks restrict financing for oil and gas expanders, and just four require client transition plans.“Banks’ fossil fuel policies have clear gaps tailored to client bases rather than climate needs,” the report states.
3. Biodiversity Strategies Lag Behind
   Banks score significantly lower on biodiversity than climate, with a mean score of 35% compared to 48%. Few banks integrate biodiversity into risk assessments or set detailed biodiversity-related targets.“Without better use of available tools, banks cannot adequately assess biodiversity impacts,” the report highlights.

Related Article: ISSB to Add Biodiversity, Just Transition Disclosures to Climate Reporting Standard

Green Finance Challenges

Twenty-four banks have set green finance targets, but a lack of external auditing raises concerns about greenwashing. Disclosures are inconsistent, and criteria for green finance activities lack clarity.

“Most banks provide green financing to clients that would otherwise be excluded by sector policies,” the report warns.

Recommendations

To address these gaps, banks should:

• Strengthen fossil fuel and biodiversity policies with clear, enforceable targets.
• Enhance transparency and external scrutiny of green finance transactions.
• Leverage existing biodiversity tools like IBAT to assess environmental impacts.

“Banks must act urgently to align their practices with global sustainability goals and truly address the twin crises of climate and biodiversity,” the report concludes.

Europe’s banking sector has a pivotal role in combating climate change and biodiversity loss, but current efforts fall far short of what’s needed.

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